Smack in the middle of the bitter 2016 presidential campaign came word of trouble on the state health insurance marketplaces created under the Affordable Care Act. Some big insurers have exited the marketplaces. After two years of generally modest rate hikes, next year’s marketplace premiums are set to increase by an average of 25 percent. The median rate hike was only 16 percent, and most marketplace participants receive subsidies that shield them from the hikes’ full effect. Still, any way you slice the data, this is troubling news. I caught up with Paul Starr: to discuss how things were going.
One of the country’s most prominent public intellectuals, Starr is Professor of Sociology and Public Affairs, and Stuart Professor of Communications and Public Affairs at Princeton University. He is the author of the classic, Social Transformation of American Medicine, perhaps the most widely-cited book ever written on the history of American health policy and healthcare. (Fun-fact: Starr wrote that book in the same Yale office where I finished my own dissertation – not one of the most widely cited works in any genre.) Starr is also author of Remedy and Reaction, my favorite book-length account of health reform.
Below is an edited transcript of our conversation.
Marketplace troubles
Harold Pollack: So … the Affordable Care Act. What do you see as the state of things right now? How dire is it?
Paul Starr: It wouldn’t be dire if we had a working political system. These are not problems that are that difficult to solve. If you have a complete logjam on any new legislation, then they become much more difficult. It may also be that what we’re talking about this year is a one time adjustment in those rates in the exchanges. If that’s so, and if Clinton’s elected, then this will pass just the way the crisis over HealthCare.gov passed, and so many other crises passed. What we don’t know is whether this is a one-time increase or whether it’s the beginning of a series of such increases.
Harold Pollack: Are there things that you’re going to be looking for over the next 6-8 months that we should be paying attention to that are going to let us know this thing is doing okay? Are there pieces of information that you’re waiting to see that will really shape your view of where we are in this thing?
Paul Starr: Let’s see how much these rate increases affect enrollment. They shouldn’t affect enrollment by people with subsidies but they may depress unsubsidized enrollment, which is already pretty low. One of the next things to think about is what happens with enrollment this year. Are we going to see further rate increases or was this just the one time adjustment? I think those are the things.
Will some states begin looking at, for example, what California has done? California has managed its marketplace much more effectively than other states. Is there any learning taking place? Are the states really functioning as laboratories of democracy, the way they’re supposed to? Also, if the election brings in some Democratic governors and state legislatures, do we see several of the ones that have stayed out of the Medicaid expansion finally come in? Those are a list of things to look at for the next year.
Harold Pollack: We should also point out that two-thirds of marketplace enrollees will be able to obtain health insurance for less than $100 a month. They are largely insulated from these rate increases. Particularly people with incomes below about 250 percent of the federal poverty line should not be worried that their premiums are going to skyrocket. They will be protected.
Paul Starr: I hope they understand that. The headlines are clearly misleading a lot of people about what’s happening. I saw a Kaiser poll that indicated that the majority of Americans believe that those rate increases apply to them, even if they’re not buying insurance on the exchanges. There’s just massive confusion about this. It’s going to be difficult, I think, to allay the fears that have been aroused by all this.
Harold Pollack: Partly because there’s a political marketplace out there that rewards people who stoke those fears.
Paul Starr: Right.
Harold Pollack: It’s also frustrating that the great successes of the Affordable Care Act predominantly affect the bottom third of the income distribution. It just seems to me that the fact that we’ve got 20 more million people insured, given who those 20 million people are. These accomplishments don’t much matter in our political system.
Paul Starr: Yes. That is a systematic class bias that affects many different programs. To have a success for low-income people is not to have, necessarily, a political success because the media and the political system does not respond to that. They just don’t count as much in the public arena.
Harold Pollack: Still, I do think that there are some genuine issues with ACA. The premium increases are not a fake problem of the “death panel” type variety. Even if this year is a one-off, there’s a big increase in premiums. And many insurers have left the market. Are there some things that we can do to deal with that? To make sure that this is a one time event? To bolster the security of the system?
Maintaining a strong risk pool
Paul Starr: I agree with Jacob Hacker, there should be a public option. I don’t think a public option alone, by itself, would solve this problem. There’s first of all the issue of “adverse selection” into the exchanges.
Harold Pollack: Can you explain what you mean by “adverse selection?”
Paul Starr: The exchanges are the only way for people to get subsidies for individual coverage. That means that the people enrolling through the exchanges are going to be predominantly low income. The median income is something like 175 percent of the federal poverty level. That’s, of course, going to be relatively lower in the states that haven’t expanded Medicaid. That population is going to have relatively higher costs, on average.
If states require all individual insurance to be bought through an exchange, then they minimize the problem of adverse selection. If they allow individual insurance to be sold outside the exchange, then those insurers can, in effect, skim off the healthier, more affluent part of the individual insurance market. The answer to that is what Henry Aaron has called for, the process that’s followed in Vermont and District of Colombia: If you want to sell individual insurance in a market, you must sell it in the marketplace, in the exchange.
Harold Pollack: There’s another aspect of that, too. Many new exchange participants were uninsured and therefore have pent-up demand for services they haven’t received in a long time. These new participants in the healthcare system may face other challenges that make them complicated and costly from an insurer perspective. We don’t know very much about that at this point but that seems to me a plausible possibility.
Paul Starr: That is definitely a possibility. There are other issues, too. Consumers who enroll in the special enrollment periods are costly. And in 2014, high-risk funds were terminated in many states. Participants in these risk pools were very expensive. That population went into the exchanges. Their costs are being spread over what turns out to be, also, the smaller-than-expected exchange population. In part, these lower-than-expected enrollment numbers reflect the reality that employers have maintained coverage and not abandoned it. In part, these lower-than-expected numbers reflect the reality that the mandate has not been strong enough to motivate many healthy people to enroll. If you put those problems together and you’re trying to spread the costs of some very expensive people over a relatively smaller population, one has some real challenges.
The public option and its challenges
Harold Pollack: You said many things there. One point you’ve discussed before shouldn’t get lost. You’ve asked what the “public option” would actually look like and how we would ensure that it doesn’t fill up with sick people. Or if it does, at least that it’s done in a planful way. Luke Shaefer, Coleen Grogan, and I examined enrollment in the CHIP program. We showed that families with sick kids migrate toward public rather than private insurance. In many ways, public insurance is better than private insurance, from the perspective of families dealing with real health problems. The resulting practicalities must be addressed. We hear much from the left that we have to have a public option or single-payer. We don’t hear as much about what these would actually be. There’s sometimes the sense that we can flip some switch and it will just go.
Paul Starr: Right. Because there is a mistaken impression that merely eliminating profits will do wonders. There’s a failure to understand that the costs of any health insurance policy depend on who enrolls in it. If very sick people enroll, costs are going to be high even if there is no profit whatsoever. Having a well-constructed market also means having good risk selection measures. It’s critical to have good measures to accommodate or counter the movement of costly people into particular plans. The exchanges were established with a variety of built-in protections, some of which are now expiring. I worry that the remaining methods are inadequate to protect a public option from getting overloaded with the high cost enrollees. Everybody has to face this problem.
Harold Pollack: What does it actually mean to say that it would be overloaded? I take it your worry is that the budgetary costs of the public option would be greater than anticipated, and thus the program would be labeled a failure.
Paul Starr: Yes. These were my worries in the debate over the Affordable Care Act, back in 2009 and 2010. I wrote several pieces saying that advocates of the public option ought to be very careful about having one that was designed to fail. In particular, if the public option had just been set up to use negotiated rates, as opposed to something pegged to Medicare rates, it might very well have attracted high risk enrollees and been stuck paying the same kinds of rates that private insurers pay. So it might not have developed into the plan that advocates of the public option were expecting.
Harold Pollack: Public option proponents’ great hopes were precisely the great fear of many others in the medical economy. Many advocates were saying: If you really want to control costs, we can use the federal government’s bargaining power as leverage to do things our fragmented system of private insurance never could. The entire supply side of the medical economy understands this argument – and is horrified by it. Whatever reform we undertake must be enacted through the same $3 trillion political economy that makes our current system dysfunctional. Nobody’s shown me how to navigate that path, politically or programmatically. So much of the conversation seems rather utopian, hoping that the opposition stops paying attention while we enact what we want.
Paul Starr: Yes. I think the problems in overcoming that opposition are now even greater than they were back in 2010.
Harold Pollack: Why?
Paul Starr: Because of the growing disparity between Medicare rates and private insurance rates. As you know, private insurers are paying, on average, 175 percent of Medicare. Some providers are getting a lot more than that, up to 300 percent of Medicare. For them, the threat posed by a public option that would pay Medicare rates is very serious. They are going to use every possible source of influence to stop that from happening. This will affect even liberal Democratic members of Congress who will be beseeched by the hospitals, including the non-profit hospitals-
Harold Pollack: My own employer, I’m sure, will be one of those …
Two public options?
Paul Starr: So working on other aspects of the exchanges may prove to be the more feasible path forward.
Harold Pollack: You’ve also mentioned that we probably would want two public options. One would be an early retirement version similar to traditional Medicare, including for people with disabilities. The other would be for younger people, and might look quite different….
Paul Starr: If we were able to do both of these things, that is reduce the waiting period for those on disability, and create a Medicare buy-in for people aged 55 to 64, those measures could remove some very high-cost patients from the marketplace risk-pool. This, in turn, would make marketplace premiums more attractive to people who are now going uninsured. I think that is a very feasible strategy that doesn’t raise as much opposition as the more general public option. The Medicare buy-in and a reduced waiting period for people on disability might really have a beneficial effect on the rates and the exchanges. It would be great to have the empirical data to back that up. I don’t have that. It seems intuitively reasonable that this would help.
Harold Pollack: That could be very appealing across party lines. More than a few 62-year-old Trump voters are worried about their health insurance. Some would look at this and say, “This is like a real thing. I see why I would want that.”
What else can be done?
Harold Pollack: If President-elect Clinton calls you (President-elect Trump probably wouldn’t be calling. Or if he did, you would have already removed the SIM card from your phone.) to ask: “What do you suggest I do to fix this?” What are the kinds of things you would tell her to do that seem more realistic in the short term, given all the obstacles?
Paul Starr: Every recommendation I might offer will face political opposition. It may be easier for some states, if they have Democratic governors and legislatures, to fix these problems at the state level. For example, states could organize their marketplaces to follow the same rules as the District of Colombia and Vermont. That is something that can be done by individual states. I don’t know how that could get through Congress, especially at this point, given the bad reputation of the exchanges. Really, that would be one of the key steps to say all policies in the individual market should be sold through the exchanges. That is crucial.
Then there is the individual mandate. We’re not going to be able to raise the penalties for failing to have insurance. But something probably could be done about enforcement. The mandate is very weakly enforced. I think many people are not taking it seriously. There could probably be some action, likely through the IRS, to give the mandate more force, and perhaps to increase compliance.
We might reduce the waiting period for people on disability insurance to get onto Medicare. Here’s an empirical question I don’t know the answer to. That is, how many of those very high cost consumers in the exchanges already have qualified for disability insurance but are still waiting to get Medicare?
Harold Pollack: I don’t know the answer on the exchanges. I can tell you that’s a good chunk of the people in high risk pools and those at-risk of medical bankruptcy. Many have already gone through the eligibility process for federal disability programs. Now they’re stuck in the waiting period. I met quite a few people in this situation in 2008, when I was doing a lot of door-to-door canvassing for the Obama campaign.
I remember well one community in northwest Indiana. Almost everyone was a McCain supporter. My daughter and I went to one house of Obama supporters. They were having a lawn sale to raise money for their son-in-law, who had a devastating liver problem. They were getting wonderful care, actually, at Northwestern hospital, and it was bankrupting them. He was exactly in the situation that you describe. As you pointed out, there aren’t a huge number of people in this situation. But there are a lot of dollars there.
In my view, the whole argument for this Medicare waiting period was a pre-ACA policy justification, before the individual mandate. As you know, Senator Max Baucus was a critical figure in establishing ACA. He wrote an early whitepaper which laid out his health care reform agenda. One of the items on that agenda was to deal with that waiting period. It just didn’t happen….
Everything that you’ve described, maybe except for the Medicare waiting period, would be wins for (presumed) President Clinton. Republicans in Congress just wouldn’t want to pass these in legislation, because this would be doing something nice for Clinton.
Paul Starr: Yeah. I think the waiting period too. If it’s nice for Clinton, they won’t do it. This morning, I’m not sure I even want to say anything that seems to presume a Clinton presidency.
Harold Pollack: One thing you haven’t mentioned: the potentially fruitful relationship between a Democratic presidential administration and Republican or conservative governors. That is very different from relationships between Democrats and Republicans in Washington, which often really is purely adversarial. I would anticipate that a bunch of Republican governors will be interested in finding a way to work with Clinton, particularly on issues that stay off the front page.
I suspect many envy John Kasich coming in on the Medicaid expansion, for example. They’ll have to extract something from Clinton, politically, to have a dignified path to do that. There’s at least a basis for negotiation and overlapping interests there. Democrats want to see more people insured. Republican governors want to see more resources flowing into their state.
Paul Starr: Especially if this works for them in some way to address their budget problems, then indeed I think they may be willing to work with a Democratic president.
Harold Pollack: She may have to put the screws to them a little bit to increase that. The Obama administration has been pretty willing to let Republican governors find ways to fill some of the budget holes that Medicaid non-expansion keeps open.
Paul Starr: Yeah, I wonder what’s going to happen in Kentucky where the new Republican governor is making demands about Medicaid that I think would set a very bad precedent.
Advice for Clinton (or whoever wins)
Harold Pollack: I wonder if you have a sense of what are the things that you would feel good telling President Clinton. “You can bend on this but not on that.” They need some concession. Do you get a sense of the no-go areas for Democrats?
Paul Starr: They want to impose some kind of insurance payment on Medicaid. I think that then you’re going to have problems with collecting those insurance payments, just the way we have them in the exchanges. Many people will not be current on their payments. Then you get back to the problem of the uninsured. I think Medicaid has to remain free.
Harold Pollack: I agree with you on the substance, but I wonder if there’s a way to set that up to be a sheep in wolves clothes where you say the Republican governors: “You want to be able to say that you’re doing this. We want to make sure that nobody ever gets cut off if they don’t pay. Is there a way to finesse this where there’s a nominal premium and, if you don’t pay it, there’s a fake penalty or there’s a wellness benefit which you lose if you don’t pay the premium?”
If Texas said: “We want to charge $15 a month for Medicaid. This is our price to pay. We want to have a $25 co-payment at the emergency room, and you have to watch a five minute video about how wonderful our governor is.” I could see, sitting down in a room and saying, “Okay, let’s talk about what actually happens if people don’t pay.”
I agree with you that it’s a bad precedent. But I tend to be a softie on these issues. Three million uninsured people are stuck in the Medicaid gap. We’ve got to give Republicans something to bring back, so they have a way to justify expanded coverage to their own people.
It is striking, in the disability arena, that many of these firebrand Republican governors are working with the Obama administration every day: Money follows the person, various Medicaid waivers most people reading this interview have never heard of, but that actually involve significant amounts of money and human lives. As long as nobody talks about these arrangements, they work well. As soon as anyone tries to exercise political leadership by mobilizing people politically, it becomes radioactive. Which is such an ironic conception of what political leadership requires.
This gets to the last thing I wanted to talk to you about before I let you go. It does seem like everything about ACA, the way that it had to be passed, what we’re dealing with now, exemplifies the fundamentally flawed character and operation of our political institutions. To accomplish anything worthy, like ACA, you have to barnacle onto an existing, dysfunctional system even more complexity, which then creates its own political vulnerability. That makes me very pessimistic about our capacity to solve problems. I wonder if you can console me.
The good that’s been done.
Paul Starr: I agree with you that the law is too complex. The whole healthcare system is too complicated. Those complications create enormous frustrations for people in dealing with both government programs and private insurance. This is, in many ways, an unnecessary bureaucratic monstrosity. You look at other countries, so much simpler.
The lesson here is we got this way through compromise. One compromise after another has built up a lot of this complexity. Now, having said that, I do think you should take some encouragement from the fact that, with all those problems, we have extended health insurance coverage to nearly everybody, 90 percent of the society. A lot of good has been done.
That’s generally true about the Obama presidency. Even with all of the constraints that Obama faced, in many different areas, he has been able to make significant progress. I just finished writing an article about inequality in the Obama years. I think most of the people reading this probably believe that it’s just as bad as it was in the past or maybe it’s worse than it was in the past. Actually, that’s not true. If you look at the data that are now coming out. First of all, through the Recovery Act, secondly, through ACA, and third, through tax changes, the sum total has actually been very progressive.
People just don’t appreciate, yet, how significant all those changes were. Despite all the constraints, despite the bitterness, the polarization and so forth, we have actually made some progress. What happens in this election still remains to be seen.
Harold Pollack: It’s important to underscore the progress you just described. A drumbeat of cynicism and bad news can produce a disempowering sense of we’re stuck and there’s nothing that we can do. We need evidence-based optimism that is realistic but that says, “Here are some things we actually are accomplishing.”
I do a lot of work in criminal justice system here in Illinois. It’s all made possible by the Medicaid expansion and the fact that we know pretty much everyone leaving the Cook County Jail has a Medicaid card now. We’re doing a randomized trial of interventions to help people living with mental illness. Many go out into the night, and they’re lost until they come back after urinating in the street or getting into a fight. We can now create an integrated public health system to help them because almost everyone leaving the jail is insured. Only five years ago, the great majority were uninsured.
Will we shy away from the big things?
Without that sense of optimism, I worry that our leaders will shy away from tackling big issues. Imagine, for example, that it’s 2033. I’m a new president, Democrat or Republican, and I really want to do something big about climate change. My chief of staff might say, “There was once this president named President Obama and he actually passed this big health insurance expansion. This is what it cost him. This is what he had to put into it.”
I worry that our leaders will see that history and shy away from these big things. Progress is so hard. The end product necessarily requires so much compromise that your own best supporters can come away jaded and disappointed by the very legitimate and important progress that you’re able to make.
Paul Starr: Yeah. We’re slogging through a difficult historical period right now. That doesn’t mean we’ll always be slogging through. There will, I think, be breaks coming in the future. I’m not convinced we have to settle for what we’ve been experiencing.
Harold Pollack is the Helen Ross Professor at the School of Social Service Administration. He is also Co-Director of The University of Chicago Crime Lab. He has published widely at the interface between poverty policy and public health. Pollack serves as a Fellow at the MacLean Center for Clinical Ethics at the University of Chicago, and as an Adjunct Fellow at the Century Foundation.
